SFO arrests over Patisserie Valerie accounting fraud

The Serious Fraud Office has stepped up its investigation into café chain Patisserie Valerie with the arrest of five people over the accounting fraud uncovered last autumn

The arrests took place last week in a joint operation with the police and is part of investigations into a £40m accounting fraud at Patisserie Valerie.

In a statement the SFO said: ‘On Tuesday 18 June, as part of a joint operation with Hertfordshire, Leicestershire and the Metropolitan Police Services, five individuals were arrested and interviewed in connection with the Serious Fraud Office investigation into individuals associated with Patisserie Holdings PLC.’

The arrests are the latest phase in the fallout from the collapse of Patisserie Valerie.

Last October, KPMG was hired to conduct a forensic investigation after the company collapsed and found evidence of ‘devastating’ fraud and deliberate manipulation of the accounts.

‘The work carried out by the company's forensic accountants since then has revealed that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts,’ parent company Patisserie Holdings said in a statement at the time.

‘Among other manipulations, this involved thousands of false entries into the company's ledgers. It will take some time before a reliable trading outlook can be completed while the above work streams progress.’

The statement said the initial indications from the work carried out to date was that the cash flow and profitability of the business had been overstated and was materially below that announced in the trading update on 12 October 2018, immediately after the company first identified problems, which was based on limited work carried out over a 48-hour period.

At the time, Patisserie Valerie suggested figures of £120m revenue for the year and earnings of £12m.

Former company auditor Grant Thornton was sacked when the fraud was discovered and is under investigation by the Financial Reporting Council (FRC), which is investigating the mid-tier firm’s audit of the financial statements of Patisserie Holdings for the years ended 30 September 2015, 2016 and 2017 under its audit enforcement procedure.

The regulator is also conducting an investigation under the accountancy scheme into Patisserie Valerie’s former chief financial officer (CFO), Chris Marsh, over the preparation and approval of Patisserie Holdings Plc’s financial statements and other financial information provided by Marsh.

Patisserie Valerie went into administration in January amid claims about missing invoices and a £40m accounting fraud which came to light last October. Administrators at KPMG immediately closed 70 stores and concessions before it secured a sale into private equity.

Irish private equity firm Causeway Capital Partners stepped in to rescue the company in February and acquired 96 stores. At the time All members of staff across the Patisserie Valerie and Philpotts chains were transfered to the purchaser with immediate effect. The Dublin-based fund  currently owns some cafes within its portfolio, including BB Bakers & Baristas, which controls 65 stores in the UK and Ireland.

Sara White

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